A pilot project to reduce peak-time traffic congestion in Birmingham and the West Midlands will be based on rewarding people for not using their cars rather than penalising those who do want to drive.

Mike Whitby (right), leader of Birmingham City Council, said the region's seven metropolitan councils were not interested in imposing a financial penalty on drivers.

Coun Whitby (Con Harborne) was explaining Birmingham's commitment to a pilot study into road pricing, which could see the West Midlands become the first English region to experiment with methods aimed at reducing road usage.

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If chosen by the Government, Birmingham and the West Midlands would be able to access a £2 billion fund for public transport improvement - raising hopes that major projects including the rebuilding of New Street Station and the extension of the metro network could be accomplished.

Coun Whitby told a meeting of the Birmingham cabinet: "The leaders of the seven councils are quite clear that they have ruled out workplace levies and cordon-style congestion charging. These are old fashioned methods and aren't seen as tomorrow's world.

"We are only interested in reward-led reform. There will be no ordering around and people will choose what they feel comfortable with. Nothing will be forced on us."

Coun Whitby said the region's approach, rejecting financial penalties in favour of compensating drivers for leaving their vehicles at home, had the backing of Alastair Darling, the Transport Secretary. It was the intention that motorists would be charged for the actual use of their cars.

He was backed by Councillor Paul Tilsley (Lib Dem Sheldon), deputy council leader, who said: "Anything we can do to get away from the very old fashioned technology of placing a cordon sanitaire around a city is the way forward."

David Bull, head of transportation strategy for the city council, said the region's local authorities would look at ways of developing innovative road pricing schemes in an attempt to reduce the annual £2.5 billion cost of congestion.

Mr Bull added: "This is about managing demand for travel in order that we can have successful regeneration."